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Wednesday, May 28, 2008

The Laura Richardson Saga Evolves

Michelle Malkin has broken some very significant news in the evolving saga of Laura Richardson, the Congress woman facing foreclosure.

Here’s another installment in the deadbeat Dem/defaulting Hillary superdelegate chronicles of Congresswoman Laura Richardson (D-Calif.) in case you missed it over the holiday weekend. It’s getting smellier and smellier. Turns out she has defaulted on not one, but three home loans–yet somehow managed to loan her election campaign $77,500. In fact, it appears there is a pattern here of cashing out her homes to fill her campaign coffers. But there has been no uproar in Congress over this lawmaker’s appalling behavior. Why? Because it would upset the bipartisan narrative that all homeowners are victims, all lenders are sharks, and that no bad incentives
to walk away exist.

Take away her status as a Congresswoman and her situation is very, VERY, similar to that of millions of others now facing foreclosure. This new news only reinforces that idea. Richardson falls into two categories of phenomenon that contributed to the mortgage crisis.

The first category was the proliferation of no money down loans. That's exactly what she got on the first home in question. By putting no money down she had significantly less stake in the home. If you don't put any money down, you don't lose any down payment when that home is taken. As such, no money down loans account for a significant portion of foreclosed homes. This is important to understand because the psychology behind the proliferation of foreclosures in no money down loans has nothing to do with being taken advantage of and everything to do with being irresponsible.

The second phenomenon is the phenomenon of buying up several properties all at once. Investing in real estate only became "chic" in the last few years as loans became so aggressive that it was even possible to do that with no money down. Obviously, if Ms. Richardson had three loans foreclosed, more than one of those was for investment purposes. The proliferation of inexperienced real estate investors was another significant factor in perpetuating the mortgage crisis. This is again important for the same reason. High foreclosure rates in this category have nothing to do with being taken advantage of and everything to do with being inexperienced and foolish.

What we are clearly seeing is a Congress woman that made many of the same mistakes that folks that politicians want to hold up as victims made in getting their homes foreclosed. Since this story broke, I have made the assertion that the forces against mass bailouts should make the Congresswoman the poster child for the folks we would be bailing out. The more we learn about her troubling case, the more it becomes a political asset for us.

No money down loans, the proliferation of investment property purchases, along with the explosion of stated loans were the three biggest categories of loans that went into foreclosure. I suspect that Ms. Richardson even received a stated loan because buying up a half million dollar home on her legislator's salary doesn't appear to add up.

Mass bailouts work as a political tool only because those that are to be bailed out are sympathetic. Check out how skillyfully Barack Obama did it yesterday...

Here, in Nevada, we see how so many people are fighting for their American Dream. Because in so many ways, Felicitas and Francisco have lived the American Dream. Their story is not one of great wealth or privilege. Instead, it embodies the steady pursuit of simple dreams that has built this country from the bottom up....

Yet a predatory loan has turned this source of stability into an anchor of insecurity. Because a lender went for the easy buck, they are left struggling with ballooning interest rates and monthly mortgage payments. Because Washington has failed working people in this country, they are facing foreclosure, and the American Dream they sought for decades risks slipping away.

When the folks being bailed out are Felicitas and Francisco, then a mass bail out sounds just fine to millions of compassionate Americans. When the subject of a bailout is a Congress person, then suddenly the perception is different. Yet, perception is probably the biggest difference between the case of Laura Richardson and Felicitas. Ms. Richardson made the same foolish mistakes that millions of others made. Because she is NOT a sympathetic character her case can be used by the forces against mass bailout to show its dangers just as well as the case of Felicitas is now being used to make the case for mass bailouts.

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